· Climate technology needs help, government told· Latest market intervention 'shows what can be done'
Terry Macalister
The Guardian,
Tuesday September 23 2008
Governments need to show the same boldness to intervene in the markets to kickstart a move to a low-carbon economy as they did when they helped the banks stave off financial crisis last week, a leading academic has demanded.
"Both require strong regulation for efficient economic outcomes," said Terry Barker, a climate change expert at Cambridge University, who fears the Lehman Brothers and HBOS problems foreshadow a global economic downturn.
Barker's concerns were backed up by one of the government's scientific advisers, who fears that a downturn could lead to a lack of investment in vital new sectors such as developing carbon capture and storage plants.
"When you have a downturn of this kind, it does lead to a disinvestment in this kind of technology," said Robert Watson, a former World Bank adviser who is now at the Department for Environment, Food and Rural Affairs.
There were marked similarities between the lack of transparency and action on complex lending risks that had wreaked havoc in the banking community and the kinds of dangers being stored up by corporate and political inaction over global warming, said Barker, the director of the centre for climate change mitigation research at Cambridge.
"Both threaten the economy with catastrophic collapse," added the economist, who has worked with the UN's Inter-Governmental Panel on Climate Change, and was speaking with Watson at the Entrepreneurship for a Zero Carbon Society conference at Cambridge University.
Barker believes the problems on Wall Street will take potential investment money out of the system. But he says a determined response by ministers could encourage the channelling of that cash into vital work on climate change.
He fears that governments and business leaders have massively underestimated the risks posed by rising sea levels and changing weather patterns - any costs associated with moving to a low-carbon economy were, he said, "negligible" compared with the costs of doing nothing.
The banking crisis meant the rules of engagement by governments had changed completely, said Barker. The same system of "force majeure" was needed to tackle climate change through new eco-taxes, and help to supplement carbon trading.
In the past, cost-benefit analyses had been applied to justify inaction on global warming, but this was inappropriate given the enormous scale of the social, environmental and other threats being faced. "The Amazon rainforest and coral reefs cannot be substituted by money. It's obvious, but it needs repeating," said Barker.
The Cambridge academic said EU carbon reduction targets were far too low and would have to be raised if the world was to stand a chance of tackling the problem. There needed to be a 40% reduction in carbon output by 2020, not the 20% target that was currently in place.
Watson said action was needed on all fronts if the world was to avert disaster - and Britain should be forging ahead with nuclear, carbon capture and storage (CCS), and renewables such as wind, to ensure energy supplies were retained while carbon emissions fell.
With regard to CCS, he said the world needed an equivalent of the Apollo space programme of the 1960s and 70s aimed at putting a man on the Moon. There should be 20 CCS prototypes developed at the same time - the possible $1bn (£500m) cost for each facility was tiny compared with the $300bn worth of fossil fuel subsidies or the trillions of pounds' worth of economic activity that the Stern Review had indicated would be endangered every year by inaction on climate change.
Tuesday, 23 September 2008
Number of firms reporting on emissions targets falls
Terry Macalister
The Guardian,
Tuesday September 23 2008
The number of top 500 global firms reporting their carbon emissions reduction targets to the investment community has fallen, but climate change is still rising fast up the corporate agenda, a new report claims.
The Carbon Disclosure Project (CDP), a scheme developed by 385 of the world's biggest investors holding assets worth $57tn (£31tn), says only 74% of leading companies have reported their strategy for reducing emissions this year, down from 76% a year earlier.
And while more than 80% of firms in the Standard & Poor's leading 500 listed US firms accept that climate change is a risk, only a third of them have plans to reduce pollution. The project's organisers believe the fall in the number of firms reporting on emissions cuts can be put down to a changing world economic order that has pitched more Asian companies into the top 500.
Chinese, Indian and other businesses are traditionally less aware of greenhouse gas issues because many of these countries are not obliged to make reductions in carbon under the Kyoto Protocol as they are in Europe.
Overall, more companies responded to the carbon disclosure project - 1,550 of the world's biggest corporations this time compared with the 1,217 that replied in 2007.
Paul Dickinson, chief executive of the CDP - which was developed to help investors understand their financial exposure to global warming - said: "With increased regulation on the horizon, investors are requiring this information to better understand the creditworthiness of companies in their portfolio and how climate change might affect their profitability."
Global corporations view climate change as a clear risk as well as an opportunity. But they are anxious about the lack of clarity around government regulation, which they admit is holding back investment, Dickinson added.
The only British companies in the top 12 rankings for a carbon disclosure index are Scottish and Southern, the gas and electricity utility, and the banking group Barclays. Others in the list include Japanese carmaker Nissan and the German chemicals group Bayer.
The Guardian,
Tuesday September 23 2008
The number of top 500 global firms reporting their carbon emissions reduction targets to the investment community has fallen, but climate change is still rising fast up the corporate agenda, a new report claims.
The Carbon Disclosure Project (CDP), a scheme developed by 385 of the world's biggest investors holding assets worth $57tn (£31tn), says only 74% of leading companies have reported their strategy for reducing emissions this year, down from 76% a year earlier.
And while more than 80% of firms in the Standard & Poor's leading 500 listed US firms accept that climate change is a risk, only a third of them have plans to reduce pollution. The project's organisers believe the fall in the number of firms reporting on emissions cuts can be put down to a changing world economic order that has pitched more Asian companies into the top 500.
Chinese, Indian and other businesses are traditionally less aware of greenhouse gas issues because many of these countries are not obliged to make reductions in carbon under the Kyoto Protocol as they are in Europe.
Overall, more companies responded to the carbon disclosure project - 1,550 of the world's biggest corporations this time compared with the 1,217 that replied in 2007.
Paul Dickinson, chief executive of the CDP - which was developed to help investors understand their financial exposure to global warming - said: "With increased regulation on the horizon, investors are requiring this information to better understand the creditworthiness of companies in their portfolio and how climate change might affect their profitability."
Global corporations view climate change as a clear risk as well as an opportunity. But they are anxious about the lack of clarity around government regulation, which they admit is holding back investment, Dickinson added.
The only British companies in the top 12 rankings for a carbon disclosure index are Scottish and Southern, the gas and electricity utility, and the banking group Barclays. Others in the list include Japanese carmaker Nissan and the German chemicals group Bayer.
Carbon capture viable by 2030 but needs £8bn to begin now
David Gow in Brussels
The Guardian,
Tuesday September 23 2008
One of Gordon Brown's pet energy projects - to build up to a dozen pilot plants to capture and store carbon dioxide as power stations burn coal to generate electricity - would require EU subsidies of as much as €10bn (£7.9bn) over the next few years, it emerged yesterday.
A study by the consultancy McKinsey into carbon capture and storage (CCS) showed that such plants could be economically viable by 2030 at the latest. But it would require substantial public subsidies to get 10-12 plants running by the EU target date of 2015.
They cost twice or three times as much as conventional coal plants: about €2bn for the 300 megawatt plants planned by the industry, which is refusing to go ahead without public subsidies.
CCS is highly controversial, with green campaigners split down the middle over the issue. It involves capturing and compressing the CO2, transporting it to sites such as disused oil and gas fields or deep saline aquifers, and permanently storing it there.
But McKinsey said that, with coal still likely to make up 60% of EU power generation by 2030, CCS could be a vital solution to ensuring security of energy supply and reducing greenhouse gas emissions.
It could reduce emissions by 400m tonnes a year by 2030, or a fifth of planned European savings. The consultants' report, published yesterday, showed that with an aggressive commercial push from the middle of the next decade, CCS costs could come down from as much as €90 for a tonne of CO2 initially, to about €30-45 in 2030 - or in line with expected carbon prices then.
At the report's launch, Chris Davies, a Liberal Democrat MEP and the European parliament's rapporteur on CCS, said a deal could be struck soon to supply the public subsidies needed to kickstart the demonstration plants.
His solution is to take the billions from a strategic reserve - worth up to €18bn - set aside under the EU's emissions trading scheme for the creation of new, "green" plants. He claimed a majority of MEPs on the environment committee would endorse his scheme early next month.
Davies said: "We need to put this financing mechanism in place very quickly, deliver it to developers, and do it at a European level. If we leave it to national capitals, I'm not confident the projects will go ahead, and time is already running out."
But he said the subsidies would have to be monitored; through the European Investment Bank, for example, which would run tenders for the pilot plants and ensure that the public was not being "fleeced".
Andris Piebalgs, EU energy commissioner, said he personally favoured the Davies scheme, but could not commit the entire European commission. "The technology could compete with nuclear, solar, wind and gas, and help combat climate change not only in Europe but China, India and the US," he said.
Senior French officials said the EU council of ministers, which so far has opposed Davies's scheme, was considering alternative funding, such as revenues from the auctioning of pollution permits under the emissions trading scheme or from national or EU budgets.
Lars Josefsson, the chief executive of the Swedish power producer Vattenfall - which is promoting a small pilot plant with the German gases group Linde - said a swift financing solution was vital: "The boards of companies are not allowed to use shareholders' money recklessly and rack up billions of losses. We will invest in CCS if the funding gap is bridged."
The Guardian,
Tuesday September 23 2008
One of Gordon Brown's pet energy projects - to build up to a dozen pilot plants to capture and store carbon dioxide as power stations burn coal to generate electricity - would require EU subsidies of as much as €10bn (£7.9bn) over the next few years, it emerged yesterday.
A study by the consultancy McKinsey into carbon capture and storage (CCS) showed that such plants could be economically viable by 2030 at the latest. But it would require substantial public subsidies to get 10-12 plants running by the EU target date of 2015.
They cost twice or three times as much as conventional coal plants: about €2bn for the 300 megawatt plants planned by the industry, which is refusing to go ahead without public subsidies.
CCS is highly controversial, with green campaigners split down the middle over the issue. It involves capturing and compressing the CO2, transporting it to sites such as disused oil and gas fields or deep saline aquifers, and permanently storing it there.
But McKinsey said that, with coal still likely to make up 60% of EU power generation by 2030, CCS could be a vital solution to ensuring security of energy supply and reducing greenhouse gas emissions.
It could reduce emissions by 400m tonnes a year by 2030, or a fifth of planned European savings. The consultants' report, published yesterday, showed that with an aggressive commercial push from the middle of the next decade, CCS costs could come down from as much as €90 for a tonne of CO2 initially, to about €30-45 in 2030 - or in line with expected carbon prices then.
At the report's launch, Chris Davies, a Liberal Democrat MEP and the European parliament's rapporteur on CCS, said a deal could be struck soon to supply the public subsidies needed to kickstart the demonstration plants.
His solution is to take the billions from a strategic reserve - worth up to €18bn - set aside under the EU's emissions trading scheme for the creation of new, "green" plants. He claimed a majority of MEPs on the environment committee would endorse his scheme early next month.
Davies said: "We need to put this financing mechanism in place very quickly, deliver it to developers, and do it at a European level. If we leave it to national capitals, I'm not confident the projects will go ahead, and time is already running out."
But he said the subsidies would have to be monitored; through the European Investment Bank, for example, which would run tenders for the pilot plants and ensure that the public was not being "fleeced".
Andris Piebalgs, EU energy commissioner, said he personally favoured the Davies scheme, but could not commit the entire European commission. "The technology could compete with nuclear, solar, wind and gas, and help combat climate change not only in Europe but China, India and the US," he said.
Senior French officials said the EU council of ministers, which so far has opposed Davies's scheme, was considering alternative funding, such as revenues from the auctioning of pollution permits under the emissions trading scheme or from national or EU budgets.
Lars Josefsson, the chief executive of the Swedish power producer Vattenfall - which is promoting a small pilot plant with the German gases group Linde - said a swift financing solution was vital: "The boards of companies are not allowed to use shareholders' money recklessly and rack up billions of losses. We will invest in CCS if the funding gap is bridged."
Climate sceptics have their head in the sand, says the Met Office
An apparent cooling trend is exaggerated by a record high temperature in 1998 caused by El Niño, experts say
David Adam, environment correspondent
guardian.co.uk,
Monday September 22 2008 17:40 BST
Global average temperature anomaly from 1975-2007, relative to the 1961-1990 average. The black line shows the annual figure. The red line shows the trend over the full 23 years. The blue lines show the varying rate of the trend over 10 year periods. Source: The Met Office
Climate sceptics such as Nigel Lawson who argue that global warming has stopped have their "heads in the sand", according to the UK's Met Office.
A recent dip in global temperatures is down to natural changes in weather systems, a new analysis shows, and does not alter the long-term warming trend.
The office says average temperatures have continued their rising trend over the last decade, and that humans are to blame.
In a statement published on its website, it says: "Anyone who thinks global warming has stopped has their head in the sand.
"The evidence is clear, the long-term trend in global temperatures is rising, and humans are largely responsible for this rise. Global warming does not mean that each year will be warmer than the last."
The new research confirms that the world has cooled slightly since 2005, but says this is down to a weather phenomena called La Niña, when cold water rises to the surface of the Pacific Ocean. Despite this effect, the office says, 11 of the last 13 years are the warmest ever recorded.
Vicky Pope of the Met Office said the new research was in response to high-profile claims made by Lawson the former chancellor, and others that the recent cooling showed that fears of climate change are overblown, and that temperatures are unlikely to rise as high as predicted.
She said: "I think it has confused people. We got a lot of emails asking whether global warming had stopped and it prompted us to look at the data again and try and understand the situation better."
The apparent cooling trend is exaggerated by a record high temperature in 1998 caused by a separate weather event, El Niño, she said. "You could look at what happened in 1998 and say that global warming accelerated and that's not true either.
"Any statistician will tell you that you can't just draw a straight line between two points, you need to look at the underlying trend."
Despite the recent cooling, average temperatures are still rising at 0.09C per decade, the office says - down from the record 0.33C per decade measured during the 1990s.
David Adam, environment correspondent
guardian.co.uk,
Monday September 22 2008 17:40 BST
Global average temperature anomaly from 1975-2007, relative to the 1961-1990 average. The black line shows the annual figure. The red line shows the trend over the full 23 years. The blue lines show the varying rate of the trend over 10 year periods. Source: The Met Office
Climate sceptics such as Nigel Lawson who argue that global warming has stopped have their "heads in the sand", according to the UK's Met Office.
A recent dip in global temperatures is down to natural changes in weather systems, a new analysis shows, and does not alter the long-term warming trend.
The office says average temperatures have continued their rising trend over the last decade, and that humans are to blame.
In a statement published on its website, it says: "Anyone who thinks global warming has stopped has their head in the sand.
"The evidence is clear, the long-term trend in global temperatures is rising, and humans are largely responsible for this rise. Global warming does not mean that each year will be warmer than the last."
The new research confirms that the world has cooled slightly since 2005, but says this is down to a weather phenomena called La Niña, when cold water rises to the surface of the Pacific Ocean. Despite this effect, the office says, 11 of the last 13 years are the warmest ever recorded.
Vicky Pope of the Met Office said the new research was in response to high-profile claims made by Lawson the former chancellor, and others that the recent cooling showed that fears of climate change are overblown, and that temperatures are unlikely to rise as high as predicted.
She said: "I think it has confused people. We got a lot of emails asking whether global warming had stopped and it prompted us to look at the data again and try and understand the situation better."
The apparent cooling trend is exaggerated by a record high temperature in 1998 caused by a separate weather event, El Niño, she said. "You could look at what happened in 1998 and say that global warming accelerated and that's not true either.
"Any statistician will tell you that you can't just draw a straight line between two points, you need to look at the underlying trend."
Despite the recent cooling, average temperatures are still rising at 0.09C per decade, the office says - down from the record 0.33C per decade measured during the 1990s.
Met Office says climate change deniers deluded
David Adam, environment correspondent
The Guardian,
Tuesday September 23 2008
Climate change sceptics such as Nigel Lawson who argue that global warming has stopped have their "heads in the sand", according to the Met Office.
A recent dip in global temperatures is down to natural changes in weather systems, a new analysis shows, and does not alter the long-term warming trend.
The office says average temperatures have continued to rise in the last decade, and that humans are to blame.
In a statement published on its website, it says: "Anyone who thinks global warming has stopped has their head in the sand. The evidence is clear, the long-term trend in global temperatures is rising, and humans are largely responsible for this rise. Global warming does not mean that each year will be warmer than the last."
The new research confirms that the world has cooled slightly since 2005, but says this is down to a weather phenomena called La Niña, when cold water rises to the surface of the Pacific Ocean. Despite this effect, the office says, 11 of the last 13 years were the warmest ever recorded.
Vicky Pope, of the Met Office, said the research was a response to claims made by Lawson, a former chancellor, and others that the recent cooling showed fears of climate change were overblown, and temperatures were unlikely to rise as high as predicted. She said: "It has confused people. We got a lot of emails asking whether global warming had stopped and it prompted us to look at the data again."
The apparent cooling trend was exaggerated by a record high in 1998 caused by a separate weather event, El Niño, she said. "You could look at what happened in 1998 and say that global warming accelerated, and that's not true either."
The Guardian,
Tuesday September 23 2008
Climate change sceptics such as Nigel Lawson who argue that global warming has stopped have their "heads in the sand", according to the Met Office.
A recent dip in global temperatures is down to natural changes in weather systems, a new analysis shows, and does not alter the long-term warming trend.
The office says average temperatures have continued to rise in the last decade, and that humans are to blame.
In a statement published on its website, it says: "Anyone who thinks global warming has stopped has their head in the sand. The evidence is clear, the long-term trend in global temperatures is rising, and humans are largely responsible for this rise. Global warming does not mean that each year will be warmer than the last."
The new research confirms that the world has cooled slightly since 2005, but says this is down to a weather phenomena called La Niña, when cold water rises to the surface of the Pacific Ocean. Despite this effect, the office says, 11 of the last 13 years were the warmest ever recorded.
Vicky Pope, of the Met Office, said the research was a response to claims made by Lawson, a former chancellor, and others that the recent cooling showed fears of climate change were overblown, and temperatures were unlikely to rise as high as predicted. She said: "It has confused people. We got a lot of emails asking whether global warming had stopped and it prompted us to look at the data again."
The apparent cooling trend was exaggerated by a record high in 1998 caused by a separate weather event, El Niño, she said. "You could look at what happened in 1998 and say that global warming accelerated, and that's not true either."
Climate change fears after German opt-out
By Chris Bryant in Berlin, Fiona Harvey in London and Tony Barber in Brussels
Published: September 22 2008 16:43
A German government decision to back an almost total exemption for industry from new rules that would force companies to pay for the carbon dioxide they emit threatens to undermine a key tenet of European Union climate policy, climate campaigners warn.
The decision is a victory for German industry, which feared European Commission proposals for an auction of carbon emission permits would cost billions of euros and restrict its ability to compete internationally.
Sigmar Gabriel: seeks establishment of special rules
Angela Merkel, chancellor, warned recently that although she supported the need to tackle climate change, she “could not support the destruction of German jobs through an ill-advised climate policy”.
Climate campaigners said the move would open the door to a slew of objections from other states seeking to protect their own key industries during the next phase of the EU emissions trading scheme (ETS).
“There are a lot of countries that want to protect their own industries without the economic arguments to back this up,” said Joris den Blanken, senior policy advisor at Greenpeace.
The European parliament’s industry committee last week voted to replace the current free distribution of carbon-dioxide permits with a mandatory auction between 2013 and 2020 in a bid to help cut European greenhouse gas emissions by 20 per cent from 1990 levels.
The proposals are likely to face a vote at a plenary session of the parliament later this year but must then be ratified by the heads of member states.
The German government is not alone in seeking opt- outs. Poland is anxious that auctioning could severely affect its power companies while Italy is pushing for free carbon permits for specific sectors.
After months of internal wrangling, Germany has accepted that from 2013, power companies, including those that construct new power plants, should take part in the auction process.
However, because this is expected to lead to higher electricity costs, the government is to insist that energy-intensive industries like aluminium producers should be compensated with free carbon permits.
Germany will also push for an exemption for large emitters like the steel industry, subject to these companies using the best available emission control technology.
Remaining companies would have their purchase of certificates capped at 20 per cent of total emissions.
The German government defends its stance by claiming there is a risk of carbon-emitting industries relocating to countries where they would be free to pollute.
“As long as European companies are governed by stricter climate protection regulations than their competitors in countries like China, we have to seek to establish special rules,” said Sigmar Gabriel, environment minister.
Copyright The Financial Times Limited 2008
Published: September 22 2008 16:43
A German government decision to back an almost total exemption for industry from new rules that would force companies to pay for the carbon dioxide they emit threatens to undermine a key tenet of European Union climate policy, climate campaigners warn.
The decision is a victory for German industry, which feared European Commission proposals for an auction of carbon emission permits would cost billions of euros and restrict its ability to compete internationally.
Sigmar Gabriel: seeks establishment of special rules
Angela Merkel, chancellor, warned recently that although she supported the need to tackle climate change, she “could not support the destruction of German jobs through an ill-advised climate policy”.
Climate campaigners said the move would open the door to a slew of objections from other states seeking to protect their own key industries during the next phase of the EU emissions trading scheme (ETS).
“There are a lot of countries that want to protect their own industries without the economic arguments to back this up,” said Joris den Blanken, senior policy advisor at Greenpeace.
The European parliament’s industry committee last week voted to replace the current free distribution of carbon-dioxide permits with a mandatory auction between 2013 and 2020 in a bid to help cut European greenhouse gas emissions by 20 per cent from 1990 levels.
The proposals are likely to face a vote at a plenary session of the parliament later this year but must then be ratified by the heads of member states.
The German government is not alone in seeking opt- outs. Poland is anxious that auctioning could severely affect its power companies while Italy is pushing for free carbon permits for specific sectors.
After months of internal wrangling, Germany has accepted that from 2013, power companies, including those that construct new power plants, should take part in the auction process.
However, because this is expected to lead to higher electricity costs, the government is to insist that energy-intensive industries like aluminium producers should be compensated with free carbon permits.
Germany will also push for an exemption for large emitters like the steel industry, subject to these companies using the best available emission control technology.
Remaining companies would have their purchase of certificates capped at 20 per cent of total emissions.
The German government defends its stance by claiming there is a risk of carbon-emitting industries relocating to countries where they would be free to pollute.
“As long as European companies are governed by stricter climate protection regulations than their competitors in countries like China, we have to seek to establish special rules,” said Sigmar Gabriel, environment minister.
Copyright The Financial Times Limited 2008
Report boosts European policy on CO2
By Tony Barber in Brussels
Published: September 22 2008 16:59
European advocates of trapping and storing carbon dioxide as a means of curbing power-plant emissions received a boost on Monday when an experts’ report said the technology could become commercially viable in less than 25 years.
The study by the McKinsey consultancy estimated that for new coal-fired plants, carbon capture and storage (CCS) costs would average €30-€45 (£24-£38, $44-$66) by 2030 for every ton of CO2 prevented from entering the atmosphere.
The report was a pioneering effort to calculate the economics of CCS, a still fledgling technology that aims to capture CO2 emitted from power plants and industrial sites, compress it and transport it to permanent storage sites deep underground or underwater.
Early European demonstration projects using CCS technology are forecast to cost €60-€90 per ton of CO2 saved, making them too expensive for private companies to operate commercially, the report said.
However, with analysts at Deutsche Bank, UBS and other institutions forecasting a carbon trading right price of €30-€48 per ton by 2030, CCS would at that time become a viable proposition in Europe, the report said.
In March 2007 European Union leaders committed to building up to 12 demonstration power plants that would incorporate CCS. They took the view that CCS, though untested, was almost certain to be a vital component of the EU’s battle against carbon-driven climate change.
Eighteen months later, EU governments, the European Commission and the European parliament have still not agreed on how to pay for the demonstration plants, which are supposed to be up and running by 2015.
A vote is due in the European parliament next month that could kick-start the funding process. Chris Davies, the MEP responsible for steering CCS legislation, said that about €10bn in EU funds would be needed for the plants.
Andris Piebalgs, the EU’s energy commissioner, said: “We must make fast progress on the financing of the demonstration projects.”
Warren Campbell, the McKinsey expert who wrote the report, said it would be important to get the demonstration plants going as soon as possible if the target date of 2030 were to be met, because it takes about six years to acquire permission and build a new coal power plant in Europe.
“CCS can be economically viable by 2030, with a sufficiently aggressive roll-out,” said Tomas Nauclér, another McKinsey expert.
The report cautioned that there were several potential obstacles to widespread use of CCS technology, such as a lack of certainty about how to transport and store CO2 under existing EU legislation. Moreover, some environmentalists have raised concerns about whether stored CO2 will remain isolated from the atmosphere in the long term.
Copyright The Financial Times Limited 2008
Published: September 22 2008 16:59
European advocates of trapping and storing carbon dioxide as a means of curbing power-plant emissions received a boost on Monday when an experts’ report said the technology could become commercially viable in less than 25 years.
The study by the McKinsey consultancy estimated that for new coal-fired plants, carbon capture and storage (CCS) costs would average €30-€45 (£24-£38, $44-$66) by 2030 for every ton of CO2 prevented from entering the atmosphere.
The report was a pioneering effort to calculate the economics of CCS, a still fledgling technology that aims to capture CO2 emitted from power plants and industrial sites, compress it and transport it to permanent storage sites deep underground or underwater.
Early European demonstration projects using CCS technology are forecast to cost €60-€90 per ton of CO2 saved, making them too expensive for private companies to operate commercially, the report said.
However, with analysts at Deutsche Bank, UBS and other institutions forecasting a carbon trading right price of €30-€48 per ton by 2030, CCS would at that time become a viable proposition in Europe, the report said.
In March 2007 European Union leaders committed to building up to 12 demonstration power plants that would incorporate CCS. They took the view that CCS, though untested, was almost certain to be a vital component of the EU’s battle against carbon-driven climate change.
Eighteen months later, EU governments, the European Commission and the European parliament have still not agreed on how to pay for the demonstration plants, which are supposed to be up and running by 2015.
A vote is due in the European parliament next month that could kick-start the funding process. Chris Davies, the MEP responsible for steering CCS legislation, said that about €10bn in EU funds would be needed for the plants.
Andris Piebalgs, the EU’s energy commissioner, said: “We must make fast progress on the financing of the demonstration projects.”
Warren Campbell, the McKinsey expert who wrote the report, said it would be important to get the demonstration plants going as soon as possible if the target date of 2030 were to be met, because it takes about six years to acquire permission and build a new coal power plant in Europe.
“CCS can be economically viable by 2030, with a sufficiently aggressive roll-out,” said Tomas Nauclér, another McKinsey expert.
The report cautioned that there were several potential obstacles to widespread use of CCS technology, such as a lack of certainty about how to transport and store CO2 under existing EU legislation. Moreover, some environmentalists have raised concerns about whether stored CO2 will remain isolated from the atmosphere in the long term.
Copyright The Financial Times Limited 2008
Efforts to Curtail Emissions Gain
More Firms Believe Emitting Gases Will Cost Money
By JEFFREY BALL
How Washington might crack down on global-warming emissions won't be clear until after the fall election. But this week will bring two signs that U.S companies believe change is on the way.
Monday, the nonprofit Carbon Disclosure Project will report that more multinational corporations believe emitting carbon dioxide and other greenhouse gases in the U.S. will soon start costing money.
On Thursday, the first program to slap a mandatory cap on greenhouse-gas emissions in the U.S. will swing into motion. Ten Northeastern states have joined together to limit emissions from power plants within their borders under a program called the Regional Greenhouse Gas Initiative.
Each year, those states will issue a limited number of permits allowing the power plants to emit carbon dioxide, the greenhouse gas that results from the burning of fuels such as coal and natural gas. The power plants will have to buy permits at a price determined by an auction. The first cap doesn't hit until next year, but the first auction for the permits will take place this week.
If U.S. companies are starting to see climate change as a serious business issue, though, they aren't sure how to respond.
Of the 321 companies in the Standard & Poor's 500-stock index that responded to the Carbon Disclosure Project's questionnaire this year, 81% said they see global warming as a risk, but 33% said they have come up with targets to curb their emissions.
Consider the lack of clarity in the Northeast emissions cap.
For now, it lacks much bite. The number of permits the 10 states plan to auction off for next year would allow more emissions -- not fewer -- than the plants are expected to emit. Planners assumed when they set the cap that emissions would have risen above it by the time it took effect, meaning the cap would force a cut. In fact, emissions have been dropping, in part because falling natural-gas prices have induced power plants to shift to that less-emitting fuel. So analysts expect low permit prices at this week's auction.
Even a small energy tax, however, could hurt Northeast power producers whose competitors in other states face no cap at all.
"We need to remove the imbalance as quickly as we can," said Donald McCloskey, director of environmental strategy and policy for Public Service Enterprise Group Inc., a New Jersey power company that will be hit by the cap. He added, "We need to transition quickly to a national program" to cap greenhouse-gas emissions. Why? To spread the pain.
Write to Jeffrey Ball at jeffrey.ball@wsj.com
By JEFFREY BALL
How Washington might crack down on global-warming emissions won't be clear until after the fall election. But this week will bring two signs that U.S companies believe change is on the way.
Monday, the nonprofit Carbon Disclosure Project will report that more multinational corporations believe emitting carbon dioxide and other greenhouse gases in the U.S. will soon start costing money.
On Thursday, the first program to slap a mandatory cap on greenhouse-gas emissions in the U.S. will swing into motion. Ten Northeastern states have joined together to limit emissions from power plants within their borders under a program called the Regional Greenhouse Gas Initiative.
Each year, those states will issue a limited number of permits allowing the power plants to emit carbon dioxide, the greenhouse gas that results from the burning of fuels such as coal and natural gas. The power plants will have to buy permits at a price determined by an auction. The first cap doesn't hit until next year, but the first auction for the permits will take place this week.
If U.S. companies are starting to see climate change as a serious business issue, though, they aren't sure how to respond.
Of the 321 companies in the Standard & Poor's 500-stock index that responded to the Carbon Disclosure Project's questionnaire this year, 81% said they see global warming as a risk, but 33% said they have come up with targets to curb their emissions.
Consider the lack of clarity in the Northeast emissions cap.
For now, it lacks much bite. The number of permits the 10 states plan to auction off for next year would allow more emissions -- not fewer -- than the plants are expected to emit. Planners assumed when they set the cap that emissions would have risen above it by the time it took effect, meaning the cap would force a cut. In fact, emissions have been dropping, in part because falling natural-gas prices have induced power plants to shift to that less-emitting fuel. So analysts expect low permit prices at this week's auction.
Even a small energy tax, however, could hurt Northeast power producers whose competitors in other states face no cap at all.
"We need to remove the imbalance as quickly as we can," said Donald McCloskey, director of environmental strategy and policy for Public Service Enterprise Group Inc., a New Jersey power company that will be hit by the cap. He added, "We need to transition quickly to a national program" to cap greenhouse-gas emissions. Why? To spread the pain.
Write to Jeffrey Ball at jeffrey.ball@wsj.com
Monday, 22 September 2008
Crude Calculations
Why high oil prices are upending the way companies should manage their supply chains
By DAVID SIMCHI-LEVI, DEREK NELSON, NARENDRA MULANI and JONATHAN WRIGHT
High oil prices are forcing companies to rethink long-held strategies they use to make and move goods to market.
Supply-chain tactics that in recent years were considered essential to success -- things like moving factories offshore where labor is cheaper and making quick and frequent deliveries to retailers to keep inventories low -- are losing luster in an economy where every $10-per-barrel increase in the price of oil results in a four-cents-per-mile hike in transportation rates.
Although the price of oil recently has retreated, some investment banks still expect it to be well over $100 a barrel next year. To maintain a competitive edge, companies will need to continually re-evaluate the design and operation of their supply chains, even if it means ditching recently adopted strategies.
This is especially true for makers of products with low profit margins and long life cycles -- things like consumer packaged goods and chemicals. Higher transportation costs have the potential to take a bigger bite out of their profits than they do out of the profits of companies that make things like cellphones and personal computers, which have shorter life cycles and higher profit margins.
Here is a look at some supply-chain changes already taking place, as well as trends we expect to take hold:
Higher Prices, Bigger Inventories
When oil was cheaper, the trend was to move factories offshore and keep inventories low because costs associated with manufacturing and inventory outweighed the cheap transportation costs. High oil prices are upending those strategies.
As transportation costs become more dominant, it becomes increasingly important to minimize the length of the journey from distribution center to retailer -- the final leg of the supply chain -- and to ship in large quantities to take advantage of economies of scale. To accomplish this, additional and larger warehouses become necessary, which implies more stock, hence higher inventory levels and costs.
Data from the annual State of Logistics Report, sponsored by the Council of Supply Chain Management Professionals, suggest this already is happening. The report found U.S. logistics costs, which include all the expenses associated with moving goods, rose 52% from 2002 to 2007, including jumps of 47% in transportation costs and 62% in inventory-carrying costs. Maintaining more inventory can be risky because products may lose value if demand or prices fall. But the benefits can outweigh the risks when transportation costs become a bigger burden than inventory expenses.
Some companies are trying to cut shipping times and costs by moving factories closer to the markets they serve. This generally makes sense when transportation expenses offset savings generated by making products in low-cost countries.
Manufacturers are more likely to move factories inshore when a product is bulky, hence expensive to transport, when factory equipment and infrastructure are relatively simple to move or when getting a product to market more quickly allows a manufacturer to charge a higher price for it. Examples include furniture, appliances, flat-screen televisions, car parts and toys. Sharp Corp., for example, started moving a larger portion of its flat-screen TV manufacturing to Mexico from Asia to be closer to customers in North and South America. Flat-screen TV prices typically fall quickly, so reducing lead time by 4 weeks has helped Sharp's bottom line.
A move inshore is less beneficial when factory equipment and infrastructure are expensive to move. Mobile phones and computers are good examples because components like chipsets require heavy infrastructure to produce.
Flexible Manufacturing Will Grow
As a growing number of companies seek to serve markets from the closest factory, we predict another trend will emerge: a switch from dedicated to flexible manufacturing strategies. In flexible manufacturing, each factory is capable of making multiple products; in dedicated manufacturing, each plant specializes in making just a few. While dedicated manufacturing reduces production costs through economies of scale and fewer assembly-line set-ups, it can result in higher transportation costs because companies can't always serve demand from the closest factories. The opposite is true with flexible manufacturing -- production costs rise, but transportation costs fall.
A switch to flexible manufacturing will help companies keep cost increases in check if oil prices rise dramatically. In a recent study performed on a European manufacturing and distribution network, we quantified the total cost increase associated with a jump in oil to $200 a barrel from $100 a barrel. We found that the potential 14% increase could be cut to a 3.5% increase with a switch to flexible manufacturing, combined with the addition of a single distribution center to the supply chain to cut fuel use.
Shipping Strategies Will Change
When oil was cheaper, many companies made quick and frequent deliveries to retailers and maintained a dedicated fleet of trucks to ship products. If oil prices stay high, we predict three transportation trends will gain popularity:
First, organizations will ship larger lot sizes less frequently or try to package products more efficiently to improve truckload utilization. As reported in CFO magazine, household and personal-care products maker S.C. Johnson & Son Inc. of Racine, Wis., last year saved about $1.6 million and cut fuel use by 168,000 gallons by combining multiple customer orders and products to load the fullest, best-configured trucks possible.
Second, companies will adopt cheaper and sometimes slower modes of transportation. Thus, we project more shipments will move from air to ground and from trucks to rail to cut fuel consumption. This trend also reduces carbon emissions, so as oil prices increase, environmentally friendly initiatives start making business sense.
Third, manufacturers may rely more heavily on third-party trucking services and warehouses. Third-party carriers can consolidate shipments from many vendors to ensure their trucks are full before taking off, resulting in lower shipping costs. Similarly, third-party carriers are in a better position to reduce "deadhead" travel, which is any travel by trucks when they are empty.
Push vs. Pull
There are other steps organizations can take to mitigate the impact of high oil prices, and we expect these strategies to gain traction, too.
Kinks in the Chain
The Situation: High oil prices are forcing firms to rethink supply-chain strategies.
The Details: To cut fuel use, firms are moving factories closer to the markets they serve, shipping larger lot sizes less frequently and adding warehouses.
What It Means: With transportation expenses now considered their biggest burden, some companies are allowing inventory levels and costs to grow.
Some manufacturers may switch to a "push-based" supply chain from a "pull-based" one, meaning they will base production and distribution decisions on long-term forecasts rather than simply responding to customer demand. A push strategy becomes more attractive when companies need to ship large quantities to take advantage of economies of scale. Shipping large quantities implies a company is covering demand for a longer period of time, thus the need to base decisions on long-term forecasts.
Companies also may try to cut back on expensive rush-delivery services. By better managing inventory to ensure they have enough supply to meet demand, companies can prevent shortages that might require them to rush in parts or products from distant plants or warehouses.
Similarly, tighter integration between various stages of the supply chain can help manufacturers utilize transportation capacity more efficiently. Sharing information about what products are moving off store shelves, what promotions retailers are planning and what volume discounts distributors are offering can reduce the likelihood that manufacturers will have to use rush deliveries to meet orders.—Dr. Simchi-Levi is a professor of engineering systems at Massachusetts Institute of Technology in Cambridge, Mass., and chief science officer at ILOG, a French business-software company. Mr. Nelson is ILOG's product-marketing manager based in Chicago. Dr. Mulani and Mr. Wright are partners at technology-consulting firm Accenture Ltd., based in Chicago and London, respectively. They can be reached at reports@wsj.com.
By DAVID SIMCHI-LEVI, DEREK NELSON, NARENDRA MULANI and JONATHAN WRIGHT
High oil prices are forcing companies to rethink long-held strategies they use to make and move goods to market.
Supply-chain tactics that in recent years were considered essential to success -- things like moving factories offshore where labor is cheaper and making quick and frequent deliveries to retailers to keep inventories low -- are losing luster in an economy where every $10-per-barrel increase in the price of oil results in a four-cents-per-mile hike in transportation rates.
Although the price of oil recently has retreated, some investment banks still expect it to be well over $100 a barrel next year. To maintain a competitive edge, companies will need to continually re-evaluate the design and operation of their supply chains, even if it means ditching recently adopted strategies.
This is especially true for makers of products with low profit margins and long life cycles -- things like consumer packaged goods and chemicals. Higher transportation costs have the potential to take a bigger bite out of their profits than they do out of the profits of companies that make things like cellphones and personal computers, which have shorter life cycles and higher profit margins.
Here is a look at some supply-chain changes already taking place, as well as trends we expect to take hold:
Higher Prices, Bigger Inventories
When oil was cheaper, the trend was to move factories offshore and keep inventories low because costs associated with manufacturing and inventory outweighed the cheap transportation costs. High oil prices are upending those strategies.
As transportation costs become more dominant, it becomes increasingly important to minimize the length of the journey from distribution center to retailer -- the final leg of the supply chain -- and to ship in large quantities to take advantage of economies of scale. To accomplish this, additional and larger warehouses become necessary, which implies more stock, hence higher inventory levels and costs.
Data from the annual State of Logistics Report, sponsored by the Council of Supply Chain Management Professionals, suggest this already is happening. The report found U.S. logistics costs, which include all the expenses associated with moving goods, rose 52% from 2002 to 2007, including jumps of 47% in transportation costs and 62% in inventory-carrying costs. Maintaining more inventory can be risky because products may lose value if demand or prices fall. But the benefits can outweigh the risks when transportation costs become a bigger burden than inventory expenses.
Some companies are trying to cut shipping times and costs by moving factories closer to the markets they serve. This generally makes sense when transportation expenses offset savings generated by making products in low-cost countries.
Manufacturers are more likely to move factories inshore when a product is bulky, hence expensive to transport, when factory equipment and infrastructure are relatively simple to move or when getting a product to market more quickly allows a manufacturer to charge a higher price for it. Examples include furniture, appliances, flat-screen televisions, car parts and toys. Sharp Corp., for example, started moving a larger portion of its flat-screen TV manufacturing to Mexico from Asia to be closer to customers in North and South America. Flat-screen TV prices typically fall quickly, so reducing lead time by 4 weeks has helped Sharp's bottom line.
A move inshore is less beneficial when factory equipment and infrastructure are expensive to move. Mobile phones and computers are good examples because components like chipsets require heavy infrastructure to produce.
Flexible Manufacturing Will Grow
As a growing number of companies seek to serve markets from the closest factory, we predict another trend will emerge: a switch from dedicated to flexible manufacturing strategies. In flexible manufacturing, each factory is capable of making multiple products; in dedicated manufacturing, each plant specializes in making just a few. While dedicated manufacturing reduces production costs through economies of scale and fewer assembly-line set-ups, it can result in higher transportation costs because companies can't always serve demand from the closest factories. The opposite is true with flexible manufacturing -- production costs rise, but transportation costs fall.
A switch to flexible manufacturing will help companies keep cost increases in check if oil prices rise dramatically. In a recent study performed on a European manufacturing and distribution network, we quantified the total cost increase associated with a jump in oil to $200 a barrel from $100 a barrel. We found that the potential 14% increase could be cut to a 3.5% increase with a switch to flexible manufacturing, combined with the addition of a single distribution center to the supply chain to cut fuel use.
Shipping Strategies Will Change
When oil was cheaper, many companies made quick and frequent deliveries to retailers and maintained a dedicated fleet of trucks to ship products. If oil prices stay high, we predict three transportation trends will gain popularity:
First, organizations will ship larger lot sizes less frequently or try to package products more efficiently to improve truckload utilization. As reported in CFO magazine, household and personal-care products maker S.C. Johnson & Son Inc. of Racine, Wis., last year saved about $1.6 million and cut fuel use by 168,000 gallons by combining multiple customer orders and products to load the fullest, best-configured trucks possible.
Second, companies will adopt cheaper and sometimes slower modes of transportation. Thus, we project more shipments will move from air to ground and from trucks to rail to cut fuel consumption. This trend also reduces carbon emissions, so as oil prices increase, environmentally friendly initiatives start making business sense.
Third, manufacturers may rely more heavily on third-party trucking services and warehouses. Third-party carriers can consolidate shipments from many vendors to ensure their trucks are full before taking off, resulting in lower shipping costs. Similarly, third-party carriers are in a better position to reduce "deadhead" travel, which is any travel by trucks when they are empty.
Push vs. Pull
There are other steps organizations can take to mitigate the impact of high oil prices, and we expect these strategies to gain traction, too.
Kinks in the Chain
The Situation: High oil prices are forcing firms to rethink supply-chain strategies.
The Details: To cut fuel use, firms are moving factories closer to the markets they serve, shipping larger lot sizes less frequently and adding warehouses.
What It Means: With transportation expenses now considered their biggest burden, some companies are allowing inventory levels and costs to grow.
Some manufacturers may switch to a "push-based" supply chain from a "pull-based" one, meaning they will base production and distribution decisions on long-term forecasts rather than simply responding to customer demand. A push strategy becomes more attractive when companies need to ship large quantities to take advantage of economies of scale. Shipping large quantities implies a company is covering demand for a longer period of time, thus the need to base decisions on long-term forecasts.
Companies also may try to cut back on expensive rush-delivery services. By better managing inventory to ensure they have enough supply to meet demand, companies can prevent shortages that might require them to rush in parts or products from distant plants or warehouses.
Similarly, tighter integration between various stages of the supply chain can help manufacturers utilize transportation capacity more efficiently. Sharing information about what products are moving off store shelves, what promotions retailers are planning and what volume discounts distributors are offering can reduce the likelihood that manufacturers will have to use rush deliveries to meet orders.—Dr. Simchi-Levi is a professor of engineering systems at Massachusetts Institute of Technology in Cambridge, Mass., and chief science officer at ILOG, a French business-software company. Mr. Nelson is ILOG's product-marketing manager based in Chicago. Dr. Mulani and Mr. Wright are partners at technology-consulting firm Accenture Ltd., based in Chicago and London, respectively. They can be reached at reports@wsj.com.
Everyone Needs to Worry About Iran
By RICHARD HOLBROOKE, R. JAMES WOOLSEY, DENNIS B. ROSS and MARK D. WALLACE
Iran's President Mahmoud Ahmadinejad visits the United Nations in New York this week. Don't expect an honest update from him on his country's nuclear program. Iran is now edging closer to being armed with nuclear weapons, and it continues to develop a ballistic-missile capability.
Such developments may be overshadowed by our presidential election, but the challenge Iran poses is very real and not a partisan matter. We may have different political allegiances and worldviews, yet we share a common concern -- Iran's drive to be a nuclear state. We believe that Iran's desire for nuclear weapons is one of the most urgent issues facing America today, because even the most conservative estimates tell us that they could have nuclear weapons soon.
A nuclear-armed Iran would likely destabilize an already dangerous region that includes Israel, Turkey, Iraq, Afghanistan, India and Pakistan, and pose a direct threat to America's national security. For this reason, Iran's nuclear ambitions demand a response that will compel Iran's leaders to change their behavior and come to understand that they have more to lose than to gain by going nuclear.
Tehran claims that it is enriching uranium only for peaceful energy uses. These claims exceed the boundaries of credibility and science. Iran's enrichment program is far larger than reasonably necessary for an energy program. In past inspections of Iranian nuclear sites, U.N. inspectors found rare elements that only have utility in nuclear weapons and not in a peaceful nuclear energy program. Iran's persistent rejection of offers from outside energy suppliers or private bidders to supply it with nuclear fuel suggests it has a motive other than energy in developing its nuclear program. Tehran's continual refusal to answer questions from the International Atomic Energy Agency (IAEA) about this troublesome part of its nuclear program suggests that it has something to hide.
The world rightfully doubts Tehran's assertion that it needs nuclear energy and is enriching nuclear materials for strictly peaceful purposes. Iran has vast supplies of inexpensive oil and natural gas, and its construction of nuclear reactors and attempts to perfect the nuclear fuel cycle are exceedingly costly. There is no legitimate economic reason for Iran to pursue nuclear energy.
Iran is a deadly and irresponsible world actor, employing terrorist organizations including Hezbollah and Hamas to undermine existing regimes and to foment conflict. Emboldened by the bomb, Iran will become more inclined to sponsor terror, threaten our allies, and support the most deadly elements of the Iraqi insurgency.
Tehran's development of a nuclear bomb could serve as the "starter's gun" in a new and potentially deadly arms race in the most volatile region of the world. Many believe that Iran's neighbors would feel forced to pursue the bomb if it goes nuclear.
By continuing to act in open defiance of its treaty obligations under the Nuclear Non Proliferation Treaty, Iran rejects the inspections mandated by the IAEA and flouts multiple U.N. Security Council resolutions and sanctions.
At the same time, Iranian leaders declare that Israel is illegitimate and should not exist. President Ahmadinejad specifically calls for Israel to be "wiped off from the map," while seeking the weapons to do so. Such behavior casts Iran as an international outlier. No one can reasonably suggest that a nuclear-armed Iran will suddenly honor international treaty obligations, acknowledge Israel's right to exist, or cease efforts to undermine the Arab-Israeli peace process.
Mr. Ahmadinejad is also the chief spokesman for a regime that represses religious and ethnic minorities, women, students, labor groups and homosexuals. A government willing to persecute its own people can only be viewed as even more dangerous if armed with nuclear weapons.
Finally, our economy has suffered under the burden of rising oil prices. Iran is strategically located on a key choke point in the world's energy supply chain -- the Strait of Hormuz. No one can suggest that a nuclear Iran would hesitate to use its enhanced leverage to affect oil prices, or would work to ease the burden on the battered economies of the world's oil importers.
Facing such a threat, Americans must put aside their political differences and send a clear and united message that a nuclear armed Iran is unacceptable.
That is why the four of us, along with other policy advocates from across the political spectrum, have formed the nonpartisan group United Against Nuclear Iran. Everyone must understand the danger of a nuclear-armed Iran and mobilize the power of a united American public in opposition. As part of the United Against Nuclear Iran effort, we will announce various programs in the months ahead that we hope will be rallying points for the American and international public to voice unified opposition to a nuclear Iran.
We do not aim to beat the drums of war. On the contrary, we hope to lay the groundwork for effective U.S. policies in coordination with our allies, the U.N. and others by a strong showing of unified support from the American people to alter the Iranian regime's current course. The American people must have a voice in this great foreign-policy challenge, and we can make a real difference through national and international, social, economic, political and diplomatic measures.
Mr. Holbrooke is a former U.S. ambassador to the United Nations. Mr. Woolsey is a former director of the Central Intelligence Agency. Mr. Ross was a special Middle East coordinator for President Clinton. Mr. Wallace was a representative of the U.S. to the U.N. for management and reform
Iran's President Mahmoud Ahmadinejad visits the United Nations in New York this week. Don't expect an honest update from him on his country's nuclear program. Iran is now edging closer to being armed with nuclear weapons, and it continues to develop a ballistic-missile capability.
Such developments may be overshadowed by our presidential election, but the challenge Iran poses is very real and not a partisan matter. We may have different political allegiances and worldviews, yet we share a common concern -- Iran's drive to be a nuclear state. We believe that Iran's desire for nuclear weapons is one of the most urgent issues facing America today, because even the most conservative estimates tell us that they could have nuclear weapons soon.
A nuclear-armed Iran would likely destabilize an already dangerous region that includes Israel, Turkey, Iraq, Afghanistan, India and Pakistan, and pose a direct threat to America's national security. For this reason, Iran's nuclear ambitions demand a response that will compel Iran's leaders to change their behavior and come to understand that they have more to lose than to gain by going nuclear.
Tehran claims that it is enriching uranium only for peaceful energy uses. These claims exceed the boundaries of credibility and science. Iran's enrichment program is far larger than reasonably necessary for an energy program. In past inspections of Iranian nuclear sites, U.N. inspectors found rare elements that only have utility in nuclear weapons and not in a peaceful nuclear energy program. Iran's persistent rejection of offers from outside energy suppliers or private bidders to supply it with nuclear fuel suggests it has a motive other than energy in developing its nuclear program. Tehran's continual refusal to answer questions from the International Atomic Energy Agency (IAEA) about this troublesome part of its nuclear program suggests that it has something to hide.
The world rightfully doubts Tehran's assertion that it needs nuclear energy and is enriching nuclear materials for strictly peaceful purposes. Iran has vast supplies of inexpensive oil and natural gas, and its construction of nuclear reactors and attempts to perfect the nuclear fuel cycle are exceedingly costly. There is no legitimate economic reason for Iran to pursue nuclear energy.
Iran is a deadly and irresponsible world actor, employing terrorist organizations including Hezbollah and Hamas to undermine existing regimes and to foment conflict. Emboldened by the bomb, Iran will become more inclined to sponsor terror, threaten our allies, and support the most deadly elements of the Iraqi insurgency.
Tehran's development of a nuclear bomb could serve as the "starter's gun" in a new and potentially deadly arms race in the most volatile region of the world. Many believe that Iran's neighbors would feel forced to pursue the bomb if it goes nuclear.
By continuing to act in open defiance of its treaty obligations under the Nuclear Non Proliferation Treaty, Iran rejects the inspections mandated by the IAEA and flouts multiple U.N. Security Council resolutions and sanctions.
At the same time, Iranian leaders declare that Israel is illegitimate and should not exist. President Ahmadinejad specifically calls for Israel to be "wiped off from the map," while seeking the weapons to do so. Such behavior casts Iran as an international outlier. No one can reasonably suggest that a nuclear-armed Iran will suddenly honor international treaty obligations, acknowledge Israel's right to exist, or cease efforts to undermine the Arab-Israeli peace process.
Mr. Ahmadinejad is also the chief spokesman for a regime that represses religious and ethnic minorities, women, students, labor groups and homosexuals. A government willing to persecute its own people can only be viewed as even more dangerous if armed with nuclear weapons.
Finally, our economy has suffered under the burden of rising oil prices. Iran is strategically located on a key choke point in the world's energy supply chain -- the Strait of Hormuz. No one can suggest that a nuclear Iran would hesitate to use its enhanced leverage to affect oil prices, or would work to ease the burden on the battered economies of the world's oil importers.
Facing such a threat, Americans must put aside their political differences and send a clear and united message that a nuclear armed Iran is unacceptable.
That is why the four of us, along with other policy advocates from across the political spectrum, have formed the nonpartisan group United Against Nuclear Iran. Everyone must understand the danger of a nuclear-armed Iran and mobilize the power of a united American public in opposition. As part of the United Against Nuclear Iran effort, we will announce various programs in the months ahead that we hope will be rallying points for the American and international public to voice unified opposition to a nuclear Iran.
We do not aim to beat the drums of war. On the contrary, we hope to lay the groundwork for effective U.S. policies in coordination with our allies, the U.N. and others by a strong showing of unified support from the American people to alter the Iranian regime's current course. The American people must have a voice in this great foreign-policy challenge, and we can make a real difference through national and international, social, economic, political and diplomatic measures.
Mr. Holbrooke is a former U.S. ambassador to the United Nations. Mr. Woolsey is a former director of the Central Intelligence Agency. Mr. Ross was a special Middle East coordinator for President Clinton. Mr. Wallace was a representative of the U.S. to the U.N. for management and reform
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